How much does equity release cost?
There are several costs that may apply when taking out an equity release plan, including advice fees, valuation fees, legal costs and product fees. Not all fees apply in every case, and the overall cost will depend on the product chosen and your individual circumstances.
Product fees
Some lenders may charge a product fee at the point of application. Whether a product fee applies, and the amount charged, will depend on the lender and the specific product selected. This information is based on a review of publicly available lender product literature and is provided for general information only. Fees are subject to change.
Legal fees
Part of the process of releasing equity involves meeting with an independent solicitor and instructing them to carry out the legal work. Legal costs will vary between solicitors and will depend on the work required and the complexity of your circumstances. It’s a good idea to compare quotes and check what is included before you instruct a solicitor.
Advice fees
Equity release is an advised product and cannot be taken out without the help of a qualified adviser. As such, you may find that an advice fee will be due. Royal London Equity Release Advisers charge an advice fee not exceeding £1,690, and this is only due if you choose to proceed and take out a product with their help.
Interest rates
Payments towards equity release with a lifetime mortgage are optional. If no payments are made, interest is added to the loan and interest is then charged on both the original amount borrowed and the interest is already added. This means the amount owed can increase over time due to interest building up.
Because of this compounding effect, the total cost of equity release can grow significantly over the long term. Making voluntary payments, where available and affordable, can help reduce the impact of interest building up over time.
Repayment fees
If you are likely to consider repaying some or all of your equity release plan in your lifetime, make sure you are aware of any potential early repayment charges (ERCs) involved. Your adviser can help you to consider equity release products with fixed and defined early repayment charges.
Your adviser will explore all the above potential costs during a no-obligation appointment and explore what the best product option for you could be.
Other important considerations
There are other important factors to consider when releasing equity. A lifetime mortgage – a loan secured against your home – will reduce the value of your estate. Releasing equity can also affect your entitlement to means-tested benefits. The impact will depend on your individual circumstances, so it’s essential to seek personalised advice before proceeding.
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